Situation

A professional office building in Coquitlam, owned by a family for over 10 years and managed by Martello since 1994 was becoming old and worn out. New office developments in the area were about to launch and attract the best quality tenants. Consequently, landlords were seeking to lock existing tenants into long term leases as competition for new tenants was becoming extreme. Vacancy in the market was approaching 10% and asking rents were starting to decline. Seeing the market trends, Martello approached the owners with a plan to revitalize their building to ensure competitiveness.

Solution

Martello developed a comprehensive 2 phase asset revitalization plan to be implemented over a 2-year period.

Phase 1

Modernize common areas and interior lighting systems to freshen up the building and reduce utility costs

Develop new inducement structure to attract high quality professional tenants to the building

Strengthen relationships with existing tenants to increase the likelihood of renewals

Utilize new technology such as solar reflective film to support these systems

Conclusion

Once renovations were completed, the building became one of the most attractive office properties in the local market. Existing tenants who were impressed with the investments in the building renewed their leases at higher rates. Two of the anchor tenants were attracted to new developments as was originally anticipated; however, due to the work that was done new high quality anchor tenants were quickly found to fill the space.

By the end of this period, average rental rates had increased by 15% and by investing in their capital systems utility costs were reduced by 40%. Cash flow had also increased by over 25%. Martello was also able to refinance the property with the assistance of an expert mortgage broker, taking out capital for reinvestment by the family.

Thanks to prudent planning and attention to local market conditions, Martello was able to successfully bring the client through this period of high risk and position their building for continued success into the future.